ECO331H1 Chapter Notes - Chapter Week 9: Hyperbolic Discounting, Exponential Discounting, Discount Window
Document Summary
How do we value future-period consumption relative to consumption today. How happy does stream of consumption make us, and how does it compare with an alternate consumption stream. Discount rate aka pure rate of time preference. 1 util this period is worth 1+ utils tomorrow. Higher delta means more weight on tomorrow"s happiness. One util tomorrow worth utils today is individual"s cardinal instantaneous utility function is individual"s inter-temporal utility function, the utility of consumption profile is weakly preferred to if and only if. Individual"s cardinal instantaneous utility function is constant ( ) Individual"s per-period discount rate is constant; discount factor also constant. Individual"s instantaneous utility depends only on current period consumption. Exponential discounting gives us preferences that are time consistent. Many subjects prefer today over tomorrow but prefer in 31 days over in. Week 9: tying odysseus to the mast: evidence from a. Designed commitment savings product for philippine bank, implemented using randomized control methodology.
